from the what-repercussions? dept

Before there was Edward Snowden, there was of course the notably less celebrated Mark Klein. As most of you probably recall, Klein, a 22-year AT&T employee, became a whistleblower after he highlighted (pdf) how AT&T was effectively using fiber splits to give the NSA duplicate access to every shred of data that touched AT&T's network. Of course, once it was discovered that AT&T was breaking the law, the government decided to just change the law, ignore Klein's testimony, and give all phone companies retroactive immunity. It really wasn't until Snowden that the majority of the tech press took Klein's warnings seriously.

AT&T's been loyally "patriotic" ever since, often giving the government advice on how to skirt the law or at times even acting as intelligence analysts. Business repercussions for AT&T have been minimal at best; in fact, you'll recall that Qwest (now CenturyLink) claimed repeatedly that government cooperation was rewarded with lucrative contracts, while refusal to participate in government programs was punished. In fact, the only snag AT&T's seen in the years since was to have its European expansion plans thwarted, purportedly by regulators uncomfortable with the carrier's cozy NSA ties (AT&T instead simply expanded into Mexico).

Fast forward a few years and The Hill is now claiming that AT&T's relationship with the NSA could harm the company's $48 billion attempt to acquire DirecTV. This claim is apparently based on the fact that a coalition of AT&T business partners, called the Minority Cellular Partners Coalition, is warning the FCC in a letter (pdf) that AT&T's enthusiastic voluntary cooperation with the NSA shows the company's total disregard for consumer privacy.

"(Despite immunity) the Commission is still obliged to execute and enforce the provisions of § 229 of the Act, see 47 U.S.C. § 151, and it is still empowered to conduct an investigation to insure that AT&T complies with the requirements of CALEA. See id. § 229(c). And the Commission is obliged to determine whether AT&T is qualified to obtain DIRECTV’s licenses in light of its egregious violations of CALEA. This is particularly true given AT&T’s continued and ongoing pattern of misconduct. Accordingly, the Commission should investigate AT&T’s complicity in the PSP to determine whether AT&T engaged in unlawful conduct that abridged the privacy interests of telecommunications consumers on a vast scale and, if so, whether AT&T is qualified to obtain DIRECTV’s licenses."

Of course, that's simply not happening. While the NSA cooperation can be used as a broader example of AT&T's character (like the repeatedly nonsensical claims the company makes when it wants a merger approved, or how AT&T tries to charge its broadband customers extra for no deep packet inspection), it's incredibly unlikely that the same government that granted AT&T's immunity will turn around and sign off on using AT&T's behavior to squash a merger. If the merger is blocked, it will be due to more practical considerations -- like the fact that DirecTV is a direct competitor to AT&T and eliminating them would lessen competition in the pay TV space. When it comes to AT&T's relationship with the NSA, it's pretty clear by now that these particular chickens may never come home to roost.

from the because-fulfilling-promises-is-hard dept

We've covered in the past how Verizon has a long history of making promises to regulators to get special deals, and then never delivering. Usually these promises involve providing high speed fiber to the home connections, for which they get massive tax breaks and subsidies... and then never delivering. And, if people finally point out that it didn't deliver, it lobbies to drop the requirements that it had agreed to abide by (but never actually did). Of course, there's a very similar story with AT&T, and telecom analyst Bruce Kushnick, who's been the leading voice on these broken promises for years, has the details. In fact, what he notes is that AT&T has made some rather specific promises about providing broadband to get approval of mergers, but has never delivered. And now it's doing the same for its attempted merger with DirecTV.

He notes that, first, AT&T (then called SBC) promised a massive fiber broadband in 2004, as part of convincing the FCC to kill off open access requirements for fiber optic networks. So did BellSouth (eventually bought up by AT&T). And yet, the numbers they promised were never met. Because, of course they weren't. Then, when the AT&T was buying BellSouth a few years later, it promised to offer 100% broadband penetration.

If you can't see that, all you really need to know is that it says "By December 31, 2007, AT&T/BellSouth will offer broadband Internet access service... to 100 percent of residential living units in the AT&T/BellSouth in-region territory." Okay. Now, remember that, and fast forward to today. As you know, AT&T is trying to buy DirecTV, and one of the reasons it's citing for the merger is... that it will help bring broadband to 15 million customers that don't currently have broadband. Here's the press release.

AT&T will use the merger synergies to expand its plans to build and enhance high-speed broadband service to 15 million customer locations, mostly in rural areas where AT&T does not provide high-speed broadband service today, utilizing a combination of technologies including fiber to the premises and fixed wireless local loop capabilities."

Huh. As Kushnick points out: "If AT&T is already supposed to have 100% completed, how can 15 million locations -- at least 20% of all AT&T areas, not already have high speed broadband?" This certainly suggests that AT&T just flat out lied to help get the earlier merger completed.

Meanwhile, Karl Bode is pointing out that it's not just on the wireline side that this happens. Jump over to the wireless side, and its attempted (but failed) acquisition of T-Mobile, and you'll find a similar story:

AT&T does the same thing with wireless. Back when AT&T was trying to get approval to acquire T-Mobile, the company shot itself in the foot by accidentally posting a confidential document showing it would cost AT&T just $3.8 billion more to go from 80% nationwide LTE coverage to 97% coverage, something AT&T had been claiming was only possible if they were allowed to pay $39 billion to eliminate T-Mobile.

Of course, what we've now learned is that the telcos appear to know that they can pretty much say whatever they want, as long as it sounds good, because no politician or regulator is likely to ever look back and call them out on their previous unmet promises.

from the well-we-gotta-buy-something dept

This has been rumored for a bit, but over the weekend AT&T officially announced plans to buy DirecTV for $50 billion. DirecTV is one of the companies perpetually being bought and sold (or rumored to be). The company has been involved in more aborted mergers than I can remember. Either way, while Wall Street folks often like just about any merger announcement (mergers and later spinoffs are great moneymakers for the banks), even it has been scratching its head at this particular deal. At best, it seems like a sort of reaction to Comcast-Time Warner Cable and an attempt to get bigger for the sake of bigness. Though, of course, it's getting bigger in a pretty saturated market (and one that is actually on the decline due to cord cutting). Perhaps it's an admission that AT&T's own TV service, Uverse, just hasn't done that well. Or maybe it's just an admission that AT&T is swimming in too much cash.

Either way, if both this and the Comcast/TWC merger go through, then we'll have an almost complete duopoly on pay TV. Congress wasted no time in announcing that hearings will have to be held about the potential merger, and, as with the Comcast deal, expect months of puffed up rhetoric and questionable op-ed pieces, as lobbyists work over time to make sure the deal happens. Of course, there is another way that the public can make their own statement on all of this: cut the cord and stop relying on terrible pay TV deals that really just aren't worth it any more.

from the you're-really-not-very-good-at-your-only-job dept

The Weather Channel has been well-deserving of mockery over the last few years, whether its for their efforts to sex up storms by naming them (in the process creating a nation of weather neurotics who become hysterical about drizzle), or for an ocean of TV and website content that has absolutely nothing to do with the weather (here's some funny faces, yuk yuk). As such, their recent battle with DirecTV over retransmission fees doesn't find the company getting much sympathy. Especially when the channel tries to argue that people will die without their inane assortment of non-weather-related content.

Normally in such retransmission disputes the content company has some leverage over the satellite or cable TV provider because what they're withholding has somewhat irreplaceable value to the viewer (say, like "Breaking Bad"). In The Weather Channel's case, their belief that they somehow held an exclusive over weather forecasting, combined with the fact that they have increasingly gotten worse at their one and only job, has given DirecTV the upper hand in the ongoing feud. After pulling the channel from the lineup back in January, DirecTV continues to battle The Weather Channel in a very simple way -- by simply offering viewers the weather for a change:

DirecTV on Monday unveiled a suite of new weather services for its subscribers, including a feature that allows customers to gain access to local weather information at any time...The satcaster said customers tuned to WeatherNation can press the red button on their remote to access instant local weather conditions and outlook. Later this week, short term and extended weather forecasts by zip code will also be integrated into the live WeatherNation broadcast and run automatically on the channel every 10 minutes.

Surely being offered actual information on the weather will outrage viewers who love sitting through a half hour of off-topic infotainment and dreck just to get the snow forecast totals for their neighborhood. Seriously, without The Weather Channel, who'll tell us which celebrities like to hunt or provide recipes for cheesy chicken bites? Usually these retransmission feuds resolve with cable and satellite companies buckling and agreeing to some sort of significant hike (then passed on to you), though with the sort of stuff The Weather Channel has been producing in recent years, it's not clear if customers will want DirecTV to cave.

from the storming-out-of-your-contract dept

In previous stories where a television channel goes to war with DirecTV and its peers, the mantra by the channel requesting a higher contract is typically the same: our entertainment provides value beyond what we're paid. That was the case when Viacom held its fans hostage in one such dispute, for instance, or when the far-more-sane AMC had a similar dispute. The point is that it always seems to come down to nothing more than money, where the dispute is over how much monetary value a channel has to a broadcaster. Nothing more, nothing less.

Not so, when it comes to the Weather Channel's dispute with DirecTV. Sure, they similarly want more money, but their response campaign to DirecTV bristling at the request while offering a different, televised weather channel is, shall we say, slightly more melodramatic and massively more aggressive.

Usually when cable channels and distributors go to war over money, the two sides warn customers that a blackout will be inconvenient. This time, the Weather Channel is saying it'll be downright dangerous. The channel has tried to rally the public's support by reminding people that it is an emergency lifeline during severe weather.

"The Weather Channel isn't just another TV network. It's a must-have resource that keeps families safe," proclaimed a headline on Weather.com.

Hmm, so the idea is that if DirecTV doesn't meet the Weather Channel's price demands, the weather monster is going to kill everyone? That'd be one hell of a provocative argument to make if it wasn't made, you know, at the damned website from which everyone can also get that life-saving information. The argument not only pretends that DirecTV isn't offering a different weather channel that would serve a similar function, or that there are various web-based methods for getting weather reports and alerts via computer and/or smartphone and mobile device, but it also ignores the Weather Channel's own services.

This irony doesn't appear to be lost on DirecTV.

DirecTV executives say that, contrary to the Weather Channel's positioning, there are many other sources for urgent weather news these days, including WeatherNation.

"When information is readily available everywhere, it's no longer necessary for people to have to pay a premium," York said in a telephone interview. He also asserted that the Weather Channel devotes up to 40 percent of its programming schedule to "reality TV shows."

I don't know what the actual outcome of this dispute will be, but it would appear the emotional argument that everyone is going to die without the Weather Channel on DirecTV is one that should and will fall flat on its face. Good try, though, guys.

from the do-they-have-no-one-who-thinks-this-through? dept

Last week, we wrote about Viacom's really short-sighted decision to use its fans as hostages in a silly dispute with DirecTV over fees. To prevent any DirecTV customer from seeing any of its key shows, Viacom stopped streaming them online... for all customers, meaning that even those who had nothing to do with any of this couldn't legally watch the shows they liked. As we noted, this would likely only serve to drive more people to find unauthorized versions. Late in the week, we saw AMC smartly take the opposite approach and provide more online access to customers disrupted by a similar fight it was having with Dish Network.

Of course, one of Viacom's most popular shows -- and one of the key ones turned off from streaming -- is The Daily Show with Jon Stewart, which had been on break last week anyway. However, it returned last night with a vengeance, and target number one: his corporate masters at Viacom for acting as if they were China in blocking the internet, and likely driving more fans to unauthorized streams. You can watch it here (if you're in the US) complete with Viacom appending a commercial bitching about DirecTV beforehand:

When we wrote about this last week, one of our usual critics told us, in some of the most angry language imaginable, how objectionable it was that we dared to mention the obvious fact that if you don't make things available legally, people might find unauthorized versions. However, Stewart made the exact same point in his discussion of the situation.

"You're pulling the shows from the internet?!? What are you, China?!? And by the way, you don't think the kids already have a workaround? This morning, when I woke up, my 8-year-old son was watching Dark Knight Rises in 3D. They're already figuring it out. So basically you're blocking old people from watching the show, and just giving people a chance to discover that there's other entertaining s**t in the world...."

In response, Viacom has somewhat sheepishly backed down and put the Daily Show & Colbert back online (though it seems some others may be blocked). It tried to make a joke of this a bit by pointing to Stewart's mocking and noting that "The Daily Show continues to exercise the creative and editorial freedom that makes it consistently great." In other words, someone at Viacom realized they totally screwed up and even their own high profile employees were calling them on it publicly. It really makes you wonder if they have anyone at Viacom who thinks how the world will react to its crazy moves.

from the that's-how-it's-done dept

Yesterday, we wrote about Viacom's reactionary strategy of holding its fans hostage by shutting down online streams of The Daily Show and The Colbert Report after DirecTV advised its customers (who just lost access to Viacom shows) to watch them online. It was a childish move that punished a whole lot of fans (not only DirecTV users) just to gain leverage in a contract dispute, and a textbook example of how big media's shortsightedness drives people to piracy. Nobody was impressed.

So today it's interesting to hear about a network taking the exact opposite tack. AMC, home of a bunch of popular shows cast somewhat in the HBO mold, was recently dropped from the basic package for Dish satellite subscribers. AMC says that unlike the Viacom/DirecTV situation, they were not asking for more money and this was not a negotiation issue, but rather Dish trying to "gain leverage in an unrelated lawsuit."

So what is AMC's response? Well, the much-anticipated fifth-season premier of Breaking Bad, one of their flagship shows, is airing on Sunday—and they've decided to set up a special online stream just for Dish subscribers, so they can watch it for free. Meanwhile, they point out that virtually every other satellite and cable provider includes AMC in its basic package, and that several are now offering special sale prices for customers switching from Dish. They even have a toll-free line at 1-855-2DROP-DISH offering more information. For Dish, this is what you call a "PR nightmare".

But -- and here's where it gets even more interesting -- Dish claims they dropped AMC because the company insists they also carry some other less-popular networks bundled with it. That's why DirecTV says it dropped Viacom, too. It's a bit of an our-word-against-theirs situation as to the real cause of the conflict, and it's likely that neither company is entirely blameless. But AMC's first move was to go straight to the fans with a special offer to give them what they want. Viacom's first move was to... petulantly punish not only the fans involved in the dispute, but all of their fans.

Both Dish and DirecTV are experiencing backlash—even though some people support DirecTV in the bigger picture, most fans are just reacting to their favorite shows suddenly disappearing, and understandably getting annoyed with their service provider. But while AMC has leveraged the situation as a way to get good PR by offering fans something special, Viacom managed to extract its own dose of negative backlash by further depriving them.

from the um.-overkill dept

So, as the dispute between Viacom and DirecTV over how much money Viacom wants for its channels wore on, the various Viacom channels like MTV, Comedy Central and Nickelodian disappeared for DirecTV subscribers. As often happens in such situations, DirecTV told its customers that they regretted the situation and were working on it, but in the meantime, they could check out missing programs online. Viacom's massive overkill response? Pull the free streams it offers online of two of its most popular shows: The Daily Show and The Colbert Report. For everyone. Not just DirecTV subscribers. Because, apparently, pissing off consumers and driving them to unauthorized means, is... um... I don't know... supposedly going to get them on Viacom's side? This is the kind of "strategic" thinking that goes on at Viacom, apparently.

Of course, this really highlights the exceptionally distorted economics of the cable/satellite TV business, where it makes more sense to block your direct relationship with fans and piss them off... in the hopes that it might make the satellite provider to pay you more money. Viacom's new motto, apparently, is: Using our fans as hostages. This is why the TV market is so ripe for disruption.

from the drm-doesn't-work dept

We've recently discussed the fact that HBO severely limits the availability of its shows to non-subscribers, and I've speculated that the success of HBO-style programming owes a lot to piracy as a way around those restrictions. But HBO is terrified of piracy—so terrified, in fact, that they're willing to toss roadblocks in the path of their subscribing customers as well. Ars Technica saw some complaints on a satellite forum, and discovered that DirecTV users with older DVRs and TVs are suddenly unable to watch HBO shows, thanks to newly-activated encryption:

"No problem until today trying to watch HBO," a standard definition TV owner with an HR 20 DVR noted on Saturday. "Get message that the program is content protected. I can view every other channel except HBO. This wasn't the case last week. Something new?"

Ditto declared another poster a few hours later: "Noticed something strange this week also regarding HBO. Although my Sony is connected via HDMI I get the message that my 'set is not compatible with..... ' displayed too briefly to read in its entirety. It is displayed when changing between HBO channels. Same TV, same HR20 for nearly six years, never a problem prior to this."

...

"As of today, I can no longer watch HBO over HDMI to my television," another consumer disclosed. "I get an error message that says 'HDMI connection not permitted. Press SELECT for more information.' (And pressing Select does nothing.)."

Turns out the problem is HDCP encryption, a newer part of the HDMI standard that premium channels are requiring pay TV operators to implement. Ostensibly this is to stop people from obtaining high-definition copies of movies and TV shows—but of course, HDCP was cracked a while ago and this will do little or nothing to stop the dedicated (and highly organized) groups that make such copies available. Meanwhile, it forces a bunch of paying customers who were happily and habitually enjoying the content to suddenly go out and get expensive new equipment (or, quite reasonably, turn to piracy to replace what was taken from them even though they still pay for it). DirecTV suggests a workaround—switching to component video instead of HDMI—but as Ars points out, this is a pretty weak response: component video is much lower quality, and some content still won't work, because first-run movies employ selectable output control (another silly DRM restriction) to prevent analog output.

It's truly amazing that companies like HBO still pursue such strategies. There is not, and never has been, a form of DRM that effectively prevents piracy—but every single form of DRM reduces the value of the product to legitimate subscribers. It's pretty bizarre to continually punish the only people who aren't engaged in the behavior you want to stamp out.

from the all's-fair-in-murdoch-land dept

Four years ago, we wrote about claims that News Corp. had hired hackers to break the encryption on DISH Networks' satellite TV smart cards, and to "flood the market" with those cards, thereby increasing "piracy" of DISH's service. News Corp., of course, owned DISH's main competitor, DirecTV. The whole thing seemed really bizarre, and we were skeptical. This kind of thing only makes sense if you actually believe that "piracy" like that directly takes away money from the company whose service is hacked. But, it seems just as likely that flooding the market with hacked smartcards would take away business from both DISH and DirecTV in the cases where it was a true substitute (rather than going to people who would never pay for either anyway). Either way, that case ended with a jury finding News Corp guilty... but of just hacking one smartcard, for which the company was fined a grand total of $49.69... and another $1,000 for "damages." Honestly, I'm not even sure that makes sense, because if it just hacked a single smartcard, it sounds like it may have just been for reverse engineering purposes.

Of course, in the intervening years, News Corp.'s name has become a lot more closely tied to the word "hacking" thanks to the News of the World scandal where reporters regularly "hacked" into voicemails (and, by "hacked" I really mean used a widely known loophole that makes it easy to listen to many people's voicemails). So with news breaking that News Corp. is again being accused of hacking, a lot of people are thinking about the recent scandals -- but the details suggest that this may have been identical to the DISH/DirecTV story above, but with a UK focus. Basically, News Corp's subsidiary NDS is accused of hacking ITV Digital, a UK competitor to News Corp's Sky TV.

In this case, there are some more details, where it certainly suggests that at least someone at News Corp. was working closely with some hackers to publish the codes necessary to make unauthorized smartcards for ITV. ITV eventually did go out of business, and of course the article linked above quotes an exec there insisting that such "piracy" was "the killer blow for the business, there is no question."

Again, this doesn't make much sense to me. Even if all of these actions were done via News Corp., how does that actually help News Corp? People who got the hacked ITV smartcards weren't going to buy Sky TV services either. The whole thing seems pretty strange, suggesting it was either exaggerated, or whoever at News Corp. decided this was a reasonable strategy didn't even think about how getting more hacked smartcards would likely be a challenge for Sky just as much as it was for ITV.